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This is a tough situation. First off I don't believe in tampering with anything trademarked so I would never purchase the exact domain. However, what I have done is buy something similar but not exact so kinky kicks I may buy something like superkinkykicks. They may not have been thinking at the time that they were infringing on any type of trademark/copyrights and that they were only benefiting you by doing so. Is the person making you money? Does it help to increase your brand? Traffic? Can you see a positive from this person?
Failures on your part as a company was 1. - Not registering all of the main extensions. 2. Creating a proper TOS that lists anything that you do not want to see such as this. Some affiliates just don't use common sense so you need to make sure that you as a company have everything clear on what you do and do not allow.
If you are not happy with them using the domain then contact them and maybe work out a way for you to purchase the domain from them. If that doesn't work you have the choice of letting it go or proceeding by going the legal route.
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